INVEST R A Think Real ty Publ icat ion SPONSORED CONTENT
JEFF PEPPERNEY President Real Property Management
Hot Market: Raleigh The PassiveInvesting.com Team Helps Accredited Investors Build Portfolios
JIM HITT American IRA
DEMETRIOS BARNES SmartRent
Are you interested in learning about investing in apartments? Get this free guide with answers to the most common questions! Simply text PASSIVE to 803-590-1080 to receive access!
The PassiveInvesting.com Team acquires institutional-quality multifamily assets throughout the United States. We strive to improve our communities through moderate interior and exterior renovations. In addition, our team is experienced in identifying operational inefficiencies which allows us to improve operations to exceed investor expectations. Managing Partners of PassiveInvesting.com:
Dan Handford Danny Randazzo Brandon Abbott
Passive Investing: Cash-flowing Real Estate Without Hassles of Operations
he Triangle area has been at the top of the PassiveInvesting.com market list for over two years now. The market is consistently strong with growing rental demand. It took us over eighteen months to acquire our first multifamily asset in the area. apartment complex in October 2019. This continues to be a strong asset adding to our growing portfolio in the Carolinas. This asset was acquired for $51.5mil and helped us grow our multifamily portfolio to over $120mil last year. RENOVATION PLANS The plan for this property is to perform moderate interior renovations to bring the units up to the standards that the surrounding Brier Creek sub-market is commanding. This asset is located in an A-class area and thus demands granite counters, tile backsplash, new lighting and plumbing packages, and new flooring throughout. The exteriors are also receiving a face-lift with new exterior paint, landscaping refresh, package concierge service, We closed on the 270-unit, Carrington at Brier Creek,
and updating the patio area.
with $1mil in net worth, not including their primary residence, or they have $200,000 of annual income ($300,000 if married) for the past two years and have a reasonable expectation that it will continue. PASSIVE REAL ESTATE INVESTINGWITH SELF- DIRECTED IRAOR 401K FUNDS About 25-30% of our investors are investing via their self-directed retirement accounts. So many people do not realize that they can actually “self-direct” their IRA or 401ks and PassiveInvesting.com helps educate investors to learn how this is possible. LEARNABOUT INVESTING WITHPASSIVEINVESTING.COM To learn more about our group and how you can join us as a passive real estate investor visit www. passiveinvesting.com and sign up for our Passive Investor Club. One of our managing partners will schedule a call with you to discuss your investment goals to make sure we are the right fit for your investment portfolio. •
UNDERSTANDING OUR INVESTORS Our investors are everyday people looking to invest in stabilized, cash flowing assets that are typically reserved for large institutional groups. We have a mix of professionals including business owners, executives, engineers, accountants, doctors, attorneys, and a family office that trust us to find these quality assets. PassiveInvesting.com currently has over 406 active investors in our various projects. Many investors do not realize that they can invest in these types of assets until they start doing some research on their own. Our projects are reserved for the accredited investor who is looking to invest in cash flowing real estate without the hassles managing the day-to-day operations as a landlord.
WHAT ISANACCREDITED INVESTOR? An accredited investor is someone
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Using the right property management firm puts more money in your pocket—not less. Real Difference
REAL Property Management has more than 30 years of experience, in 48 states and Canada, doing just that for our clients. Our highly skilled professionals—the most thoroughly trained in the property management industry—have one goal in mind—to help you make the most of your real estate investment. That’s why REAL Property Management manages your property like you would—like a business. Successful investors across the nation have trusted us to professionally manage every aspect of their rental real estate, providing them REAL peace of mind. Put another way, REAL Property Management helps you make the most of your investment in rental real estate while you make the most of your life. Visit www.realpropertymgt.com/optimize to learn how we can put our experience to work for you, giving you real commitment, real ROI, and real peace of mind.
© 2019 Real Property Management.Each office is independently owned and operated.
Can Urban Redevelopment Guide Your Investing?
by Jeff Pepperney, Real Property Management
rban redevelopment can open up new opportunities for single-
typically find in the suburbs. What this means for rental home investors is that urban properties may need a larger budget for the remodeling and repairs necessary to bring them up to a habitable condition. Once you have done so, however, your urban rental home could become a profitable source of rental income for many years to come. Buying rental homes in urban areas can also come with some unique challenges. For example, if you are buying in an area where renewal has already begun, it can be difficult for your appraiser to get a true sense of the property value. This makes it critical to be proactive during the appraisal process, perhaps providing him or her with comparable property data or other information they will need. Another unique challenge of buying investment properties in urban areas involves the amount of attention that you will attract from city officials, nosy neighbors, and preservationists. If the property you want to buy is located in a historic district, that will add yet another layer of surveillance that may limit what you can do with the property. However, many investors have found success by creating amicable relationships with various oversight groups and individuals and reassuring them that their plans for the property include careful tenant management and property upkeep. Finally, investing in urban neighborhoods gives rental property
owners a chance to get creative with their rental strategy. Buying a property in an area in the midst of a renewal offers rental property owners a chance to consider not only what kind of tenant they are able to attract, but who their ideal tenant might be. As the area reinvigorates, there will be real opportunities to focus on a new renter demographic that might help further the project of renewal. If the location of your property has underrecognized benefits, like access to public transportation or proximity to a large school, employer, or the arts district, you can become one of the first to market your property to attract tenants interested in these features. In this way, you could significantly shape the composition of the neighborhood in which your property is located and encourage others to do the same. Ultimately, the key to successfully investing in urban renewal areas is information, and lots of it. Armed with detailed market data and a clear vision for the future, single-family rental home investors can seize upon the opportunities that urban redevelopment brings and guide their investing to new heights, and the urban area does not need to be near you. With a nationwide professional property management organization like Real Property Management, you can live far from your investment yet secure in the knowledge that your property and tenants are being managed effectively. •
family rental home investors. But could it also guide your investing strategy? As increasing numbers of entrepreneurs have entered the single-family rental home market, savvy investors are looking for new ways to expand their portfolios. Long popular with house flippers, starting or joining an urban redevelopment project could also have significant advantages for buy-and-hold single- family rental home investors. Urban redevelopment or renewal is a process through which areas or neighborhoods in a city are improved for the purpose of attracting more stable, affluent residents. For investors and developers, one of the most exciting parts of urban redevelopment is the opportunity to have a real impact on troubled parts of town. By buying, preparing, and renting quality single-family properties, rental home investors can contribute significantly to the revitalization of a neighborhood and invite others to do the same. But there are a few things to know before diving into an urban redevelopment project. For example, single-family rentals located in suburban areas are often in need of some repairs or improvements. According to urban housing experts, investors looking for urban properties should be prepared for houses in much worse shape than you would
INVESTOR REVIEW :: 7
Experience Investing Freedom with a Self-Directed IRA
Why American IRA ? The freedom of: No fees on all cash accounts $285 low, set annual fee
What is a Self-Directed IRA? The freedom to invest in what you know: Real Estate • Raw Land
• Condos/Townhomes • Single Family Homes • Commercial Buildings
• Unlimited assets and unlimited account values
Unlimited transactions option Boutique client service experience where you are treated as an individual, not a number Unparalleled educational materials Staff with 50+ years of investing experience We work with your professionals
• Trust Deeds/Mortgage Notes • Secured and Unsecured Notes
Tax Liens/Deeds LLCs Privately Held Companies Precious Metals And More...
Schedule a no-obligation free strategy session.
Small Business Plans Traditional 401(k)
SEP IRA SIMPLE Solo 401(k)
AmericanIRA.com/self- directed-ira-consultation 1-866-7500-IRA (472) info@AmericanIRA.com
www.AmericanIRA.com American IRA, 135 Broad Street, Asheville, NC 28801 15720 Brixham Hill Avenue, Suite 300, Charlotte, NC 28277 3355 Lenox Rd., Suite 1000, Atlanta, GA 30326
Self-Directed Investing: A Wealth of Opportunity Beyond Securities
by Jim Hitt, American IRA
hen most investors consider their investing options,
metals stored in depositories, and more. You can own different types of properties, from raw land to single- family homes to portions of large commercial buildings.
competitors, who charge investors a sliding-scale fee based on assets under administration. We charge the same rate for each account, regardless of size. As such, we are able to focus on providing the same high level of service to all our clients. Dealing with us is like dealing with a local bank where the employees know you well. We have ongoing relationships with our clients, which simplifies the process for them. They understand and appreciate what our business is all about. Our unique platform allows our clients to be recognized as an individual instead of just an account number. • Small business retirement plans offer self- employed and small business owners tax savings and an opportunity to save for their retirement years. We offer SEP IRAs, SIMPLE IRAs, Solo 401(k)s and Traditional 401(k) Interested in learning more about Small Business Retirement Plans or Self-Directed IRAs? Contact American IRA for a free no- obligation consultation at 828-257-4949 or visit us at www.AmericanIRA.com. s.
they may automatically think of exchange-traded securities, bonds and annuities. To diversify is to incorporate a broad mix of these types of assets. There is, however, a lesser-known path to greater diversification that includes a range of investment options outside the securities world: The Self-Directed IRA. American IRA is an established firm offering investors the opportunity to pursue more unique paths to diversification through Self-Directed IRAs and 401(k) accounts. More and more investors, and the independent advisors who serve them, are exploring these avenues. HARDASSETS: AGREAT ADDITIONTOANYPORTFOLIO American IRA clients’ investments run the gamut: real estate of all kinds, private IRA lending, private entities in need of capital, precious
Clients benefit from these alternative assets not being
correlated to the stock market. If the securities portion of their portfolio takes a dip, their hard assets may not reflect a similar decline.
KEEPING THINGS SIMPLE FOR INVESTORS ANDADVISORS American IRA serves as the Third-Party Administrator on behalf of the Custodian, New Vision Trust Company, a state-chartered South Dakota Trust Company. New Vision Trust Company and American IRA are related by common ownership. This common ownership helps create sensibility to the investment process. We charge a low, set annual fee for our services, since we are not advising or contributing to the growth of the account—unlike many of our
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GAPS in FUNDING
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• 10% interest • 3 points rolled into the loan • 9-month loan term
44 | think realty magazine :: april 2020
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thinkrealty . com | 45
Multifamily Smart Home Automation Solutions from SmartRent
by Demetrios Barnes, SmartRent
I n 2017, SmartRent set out to cre- ate software targeted specifically to the multifamily industry to allow users to manage an array of smart home devices and other third-party software using just one platform. Today we are proud to offer an en- terprise solution that allows owners, operators and staff enhanced visi- bility, better control and increased efficiency in day-to-day property operations while providing residents the ability to manage multiple smart devices and enjoy the benefits of smart home automation using one app. With 70,000+ smart homes (and growing) installed across the United States, SmartRent continues to expand its reach and develop robust product offerings and integrations for our clients. We’ve secured partnerships with industry leading investment funds, such as the Amazon Alexa Fund, which have provided additional de- velopment and technology resourc- es, enabling us to continue creating and offering new features. We con- tinue to introduce industry-leading innovations, such as self-guided property tours and access control systems to enhance your return on investment and reduce common operational inefficiencies that pain property owners and managers. In addition to our mobile-friendly web
platform, we also offer a native mobile application that allows property owners and staff to audit work orders, manage access, move residents in or out, and more, all from their mobile device. The SmartRent platform allows for efficient management of a suite of IoT devices that can be easily transferred to end users, which reduces the need for go-backs and warranty claims, adds value to your properties and provides an attractive upgrade for residents. SmartRent offers a wide range of solutions, including complete community-wide access control through a seamless keyless ex- perience and management dash- board; asset protection using smart sensors, alerts and notifications; property optimization utilizing au- tomations and scheduling features; the ability to offer self-guided tours for vacant units and more. RESIDENT BENEFITS The smart home automation industry has received an over- whelmingly positive response from consumers who experience efficiencies, such as energy and cost savings, through IoT devices. Many consumers already enjoy the benefits of automation in their daily
lives through connected devices like speakers, locks, doorbells, cameras, and thermostats, and this is just the beginning. Industry research estimates that by the end of 2023 there will be more than 6.4 billion smart home devices in use, accounting for approximately $157 billion in spending. However, there is an inefficiency in these platforms: they require users to switch be- tween multiple apps to complete IoT device-related tasks. In addition, renters are precluded from enjoy- ing the benefits of many of these devices because they are not able to install in homes or apartments they do not own. SmartRent tackles these issues head on by offering IoT devices and services for rental properties, enabling renters to ex- perience smart home benefits they are willing to pay a premium for. In a recent study, 86 percent of renters indicated that they would be willing to pay more for a unit outfitted with automated or remote-controlled devices. With SmartRent, residents have access to the automations and connectivity they desire and the ability to control their home through just one app. • Find out how you can turn your property into a connected commu- nity by contacting SmartRent today!
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Are Class-A Assets a Smart Choice in the 2020 Multifamily Market?
E ach stage in the real estate market cycle presents a variety of opportunities to shift the acquisitions thought process and the ability to various asset classes to our portfolio. Our team is constantly monitoring the ever-changing stages of the market cycles. As we move into the 2020 year, we have decided to continue looking for B+ assets in a solid, class A areas in markets with strong market fundamentals. In addition, we have decided to begin looking for class A assets which will provide some diversity to our portfolio in the coming year. As the market continues to stay strong and cap rates are low, we have seen the cap rate differential by Dan Handford, PassiveInvesting.com
between various asset classes has compressed significantly. In stable markets that we are currently seeking assets, there is very little different in cap rates from Class A to Class B to Class C. This makes it a very feasible option to start acquiring Class A assets as we move into 2020. You may be asking yourself about the risk in investing in Class A assets compared to Class B or possibly Class C. The best asset classes to be investing in a strong economy, like the one we are in right now, is Class B and Class A. We have researched the data back to the last recession in 2008 and noticed that the drop in vacancy across the asset classes was very little. It was between 30-50bps
between the various asset classes and this presents a very positive outlook for the Class A assets staying stable for a future recession. In order to fully understand the impact a recession has on the various asset classes; we must take a deeper dive into the difference between physical occupancy and economic occupancy. Physical occupancy is what tells us how many units are currently being occupied. This is a great stat, but this alone does not tell us how well a property is performing. We must be looking at the economic occupancy. The economic occupancy is what allows us to know how many of our residents are paying their rents. In the last recession we saw a
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major drop in the values of assets across all asset types, including multifamily. However, we do not really care what the value of our asset does in a recession because we are not planning to sell our assets in the middle of a recession. One thing that stayed stable was the overall income off the assets. This is important as the income off the asset is what pays the mortgage and provides additional cash flows to be able to continue to make distributions to investors even in a recession. The riskiest asset class at this point is the Class C and lower end Class B assets as these are hit the worst in a downturn of the economy. There are a couple of reasons why and I’ll explain to help you understand this better. The lower-class assets tend to continue to maintain their “physical” occupancy but the “economic” occupancy is what begins to take a hit. The residents within the lower-class properties are the ones that lose their
jobs the most when employers begin to make budget cuts. This causes the assets to begin to have higher costs due to trying to evict these non-paying residents. This will cause the economic occupancy to tank while the physical occupancy still stays stable. This is why you must always look at both figures when determining how well an asset faired in the last recession. The increased unemployment causes the lower end properties to begin to see evictions which causes higher lost revenue for non-paying residents, high legal fees due to evictions, and also higher expenses related to turning over the units more frequently. This causes the property to be strapped for cash and unable to make distributions for investors, or worse, to be forced to sell the asset in a poor economy. Selling an asset in a down economy is never good for the passive investor. As we charge ahead in 2020, our team will be continuing to look for the
higher B+ class assets and will begin looking for the nicer A class assets which are around 5-10 years old. The difference for an investor in an A class asset is that the cash flows will be a little lower which would cause a lower preferred return to be achieved. In addition, the hold period would be more like 6-10 years instead of our typical 3-5 year time horizon. Feel free to shoot me an email at email@example.com if you have any further questions regarding this topic. -Dan Handford, Managing Partner, PassiveInvesting.com. • To learn more about our group and how you can join us as a passive real estate investor visit www.passiveinvesting.com and sign up for our Passive Investor Club. One of our managing partners will schedule a call with you to discuss your investment goals to make sure we are the right fit for your investment portfolio.
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